Taxation without Representation

Here is the deal: California borrows money from the Federal government (FUTA Loan), California does not pay the loan back and, therefore, for each employee a California employer pays an additional tax $126 to Federal government in January. The result is a staggering $9 billion tax on employers who have employees in California through 2017.

California borrowed money from the federal government to cover unemployment benefits paid during the financial downturn in 2008-2010. The state has not repaid this loan and as of January 11, 2017, the balance is still $4,038,682,273 per the Department of Labor. Every other state in the United States that used this same type of federal loan has thought it best to pay back the Federal government. The state of California thought it best to not repay the loan and leave employers with a hidden, nonvoter approved tax based on the number of employees. The cost to employers was $4,844,446,000 through 2015 and it is estimated that this loan will cost employers $2,084,296,000 for 2016 and $2,464,550,000 for 2017. This puts the additional tax that employers in California will have paid from 2011 through 2017 at a staggering $9,393,292,000. That is NINE BILLION dollars.

The best thing that the State of California could do right now is payoff the $4 billion in loans. This would put $2.4 billion back into the economy as employers would not have to pay the loan tax in 2017. Don’t count on that happening, as Jerry Brown would rather spend $64 billion on his “field of dreams, if you build it they will come” bullet train to nowhere.